Regulators, legislators scrutinize shales, fracs

Legislative and regulatory officials on three continents are racheting up their scrutiny of licensing and permitting for shale oil and gas projects that involve hydraulic fracturing.

Apr 22nd, 2011

By OGJ editors HOUSTON, Apr. 22--Legislative and regulatory officials on three continents are racheting up their scrutiny of licensing and permitting for shale oil and gas projects that involve hydraulic fracturing.

France appears close to a moratorium on permitting and suspending permits already issued. South Africa’s cabinet has backed a Department of Mineral Resources decision to prohibit shale gas drilling in the Karoo region.

In North America, several shale gas wells have been drilled in the St. Lawrence Lowlands, and the Quebec government is working on an environmental evaluation of shale gas drilling.

Authorities have yet to enact regulations on fracturing in Idaho because the state has no hydrocarbon production and little drilling at that. But gas production from several vertical wells could start later this year near Boise, and the Idaho Department of Lands may develop regulations soon.

In Pennsylvania, several thousand gallons of frac fluid leaked from a Chesapeake Energy Corp. well in Bradford County during a Marcellus shale frac job. Early reports attributed the incident to a near-surface casing leak. Chesapeake said no injuries were reported.

France applies brakes France’s National Assembly voted May 10 in favor of banning shale oil and gas exploration and development in France seems a certainty.

Prime Minister Francois Fillon told the National Assembly he would back the relevant draft law submitted by the majority party to annul the authorizations already awarded for shale exploration as he put it “in unsatisfactory conditions, with not enough consultation and information.”

The Socialist opposition party has submitted similar draft legislation, as has former Energy Minister Jean-Louis Borloo, who has backtracked on the shale gas permits he had granted in March 2010 to Total, GDF Suez, and Schuepbach Energy in southeastern France (OGJ, May 10, 2010, p. 33).

A government moratorium on gas and oil shale exploration had been instituted through June 2011, and permit holders had agreed to suspend work until two commissions set up to assess environmental affects issued decisions.

Fillon said he had extended this “scientific research mission for there was no question of shutting the door on technological progress which could make it possible to access new energy resources in the future.”

Shale oil and gas exploration face strong public opposition, and the draft legislation to be discussed is based on the “precautionary principle,” included in France’s constitution, to obtain a ban on unconventional oil and gas exploration and production and to abrogate permits.

The latter step, if passed, will give rise to a complex legal situation. Accordingly, draft legislation was hastily prepared to introduce in the mining code new public consultation procedures before the award of research licenses.

Meanwhile, both the petroleum engineers association and the Drillers’ Association have been trying to persuade the deputies that shale technologies are not harmful if properly handled, while Total Chairman and CEO Christophe de Margerie has expressed irritation at the “noise” around shale before drilling even began.

The Hess Oil-Toreador partnership has insisted that it has always taken care of the environment and that its shale oil Chateau-Thierry permit in the Paris basin would be no exception.

Toreador issued an Apr. 21 statement saying it looks forward to discussion of unconventional exploration that is scheduled for parliamentary debate on May 10.

Craig McKenzie, Toreador president and chief executive officer, said the oil company will continue to interact with government agencies and communitiies where it works. "We welcome the intention to allow regulated and supervised unconventional exploration," he said.

In this context, OGJ has been told that the European Union is commissioning its own study into whether the EU legal framework sufficiently covers environmental protection with regard to unconventional gas sources. That review will not focus on the technology used, but on whether further initiatives are needed to ensure that potential exploitation complies with EU environmental standards.

Other jurisdictions No drilling has occurred in South Africa’s Karoo shales, but several companies have been granted technical cooperation permits and Royal Dutch Shell has sought permission to drill (OGJ Online, July 19, 2010).

South Africa’s minerals department imposed the moratorium in order to study the environmental implications of hydraulic fracturing.

Quebec’s Bureau d’audiences publiques sur l’environnement (BAPE), after 6 months of study, concluded more information is needed to make informed decisions about the development of shale gas. Quebec Environment Minister Pierre Arcand released the BAPE report in March.

Arcand also said no new drilling would be allowed for shale gas without local approval. He said hydraulic fracturing only would be allowed for scientific research purposes for now because knowledge about fracing is “extremely limited.”

“There will be no compromise on health and the environment,” Arcand said of fracing. “It will be done correctly or not at all.”

The Quebec Oil and Gas Association said it generally welcomed the BAPE report and the government’s response.